For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Kernan from TRADEthemove.com. After interviewing Trader-X (blog), I wanted to do a little research on Fibonacci numbers and trading since X seemed to have so much success using them. There are a small number of books available, but I was surprised at how little information there is online and in print on Fibonacci trading. Being a Math major, I knew the power of Fibonacci numbers in many aspects of nature and our world, so I was eager to see how they apply to the markets.
Luckily Kernan has published an e-book on Fibonacci trading that’s available on TRADEthemove.com. Even if you’re not looking for another indicator to apply to your trading, it’s worth knowing about “the fibs” if only to see what other traders might be looking at. Kernan has been trading for a living for 6 year now.
Read on for more about how Kernan trades, how he lost a heap of money when he first started trading, and how he’s never been mistaken for Arnold Schwarzenegger. If you have any questions for Kernan, send him an email at tradethemove AT gmail DOT com.
StockTickr: Tell us a little about yourself, Kernan.
Kernan: My name is Kernan, and I live in Texas. I have been trading since the early 90’s, and have been doing it full-time since 2000. Prior to that I was a business consultant working for one of the big six (at the time) accounting firms.
StockTickr: How did you get started trading stocks?
Kernan: I opened my first brokerage account in 1990, and made my first “trade” by buying stock in the company my brother worked for…it went up 40% and I was hooked.
StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?
Kernan: I bought a cheap stock that an “adviser” told me was poised to explode. I kept buying all the way down to sub-$1 levels, and subsequently lost a lot of money. I decided then and there that I was going to figure out how to do it on my own.
StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?
Kernan: I learned that technical analysis levels the field – everyone has access to the same data, and as long as you know how to interpret it correctly you can make money.
StockTickr: Describe your style of trading. How long do you typically hold stocks?
Kernan: My trading is best described as “swing-trading”. I trade long and short, and I typically hold 2 days to 2 weeks. If I get a windfall, I may only hold a day or two. But on average probably 3-6 days.
StockTickr: What’s your exit strategy for winning and losing trades?
Kernan: I always have a target and take profits when my stock reaches that target. I always have a stop, and close my position if my stock hits that stop.
StockTickr: What 3 books do you recommend traders read?
- Alan Farley, “The Master Swing Trader“
- Tony Oz, “The Stock Trader“
- Edwards and Magee, “Technical Analysis of Stock Trends“
- and of course (modestly), my e-book “Using Fibonacci and Moving Averages to Help Predict Price Movement“
StockTickr: What R value do you risk with each trade, i.e., what % of your portfolio do you risk with each trade?
Kernan: I typically have about 4-8 positions at any one time, and do not put more than 15% of my money in any one position.
StockTickr: Fibonacci numbers seem pretty complicated – why are they worth using?
Kernan: They can be as complicated as you want to make them. I go for simplicity, and focus on the key retracements and extensions. There is a lot of information about Fibonacci and you can really clutter your charts with all of the different strategies and methods. But I am a big fan of KISS – “keep it simple stupid” – and concentrate on how price reacts at key Fibonacci levels in relation to previous price movements on specific timeframes. As far as the question “why are they worth using”, Fibonacci levels are the only thing I have found that consistently allow me to take profits out of the market. It is amazing (and profitable) to see price react to certain levels over and over and over again.
StockTickr: Are Fibonacci numbers more suited for certain timetrames than others?
Kernan: Actually, no. They work with uncanny accuracy regardless of whether you are looking at yearly and monthly data, weekly and daily data, or intraday data. I focus on swing-trading with daily data (and sometimes monthly/yearly timeframes). But someone like Trader-X (who you interviewed) has proven how successful you can be using Fibonacci for daytrading.
StockTickr: Are there scanning packages out there to scan for certain Fibonacci setups?
Kernan: I am sure there are, but I don’t use any packages specifically designed for Fibonacci. I set-up scans in TC2000 and manually look through a lot of charts. I actually enjoy looking at charts, so I don’t try to cull my universe down to a small number. But you can do a lot with TC2000 to find candidates with certain parameters.
StockTickr: Do you backtest and, if not, how do you instill a belief in the system you’re trading?
Kernan: The belief in my system comes from results attained over the past ten years. I did backtest when I originally developed my system, but have not changed it much over the past decade so I don’t backtest as a part of my routine now. As I mentioned above, I do look at a lot of charts – and I guess that is backtesting in its own way.
StockTickr: What advice can you offer traders who are just starting out?
Kernan: Study charts, papertrade before you commit real money, and don’t depend on others. The results you get from trading will be a direct correlation to the effort you put into studying and preparing.
StockTickr: Do you prioritize physical fitness as an important part of trading?
Kernan: I am a big believer in keeping your body fit. Regardless of whether you trade for a living, or are an accountant, I think if you are in shape physically then you are better able to think and perform at your chosen endeavour. Don’t get me wrong, I have never been mistaken for Arnold. But I exercise daily, and for my age I think I am in great (above average) shape.
StockTickr: What do you like best about trading?
Kernan: I don’t have to answer to a “boss”, and I don’t have to worry about losing my job!
StockTickr: Thanks, Kernan!
Kernan: Sure, Dave.
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Stay tuned – there are several interviews on the way. You can subscribe to these interviews via RSS feed.
- Richard Todd
- Andy Swan
- Steve Nison of Candlestick Charts
- Dan Mirkin from Trade-Ideas
- Bruce Brotnov
- Eric Cahoon
- Ugly from Uglychart.com
- Alan Farley
- Declan Fallon
- Smita Sadana
- Bill Cara
- Van K. Tharp – Free autographed copies of Van’s book still available! Get yours now!
- Brett Steenbarger
- Eyal Maoz
- Gary B. Smith, the Chartman
- Nusair Bawla (alibawla on StockTickr)
- Dave Landry, Swing Trader
- Jeff White, the Stock Bandit
Do you have suggestions for other traders you’d like to see an interview with? Let us know!